How to Close the Retirement Gap Before, During, and After You Turn 60
Turning 60 and seeing retirement may be exciting, but it can also be daunting without proper savings and investments built over time.
While some experts recommend having six to eight times your current salary saved by age 60, others recommend even more. But how do you get there, and what if it seems like too late to set aside for retirement?
Keep reading below to learn some tactics about closing the retirement gap and being prepared for the future.
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Benchmarks to Hit
The six-to eight-month guideline is daunting. For instance, someone earning $100,000 a year would have to aim for roughly $600,000-$800,000. This is a general marker, according to experts, and some even push for a larger amount saved. This is because the amount saved will better withstand decades of spending and market swings, not even including inflation.
Fidelity provides a 20 times savings strategy where you adjust your current salary for the number of years until you retire to account for inflation, and then multiply it by 20. It would look like 1x salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67, factoring in a 15% annual savings rate and a balanced long-term investment mix.
Of course, personal targets and goals will vary with lifestyles and expected retirement ages.
The 4% Rule and Its Limits
The 4% rule is when you divide your desired first-year retirement spending by 4% to estimate the portfolio you need. While it may be a widely used tool, it may not be the most useful.
According to experts in Investopedia, under the 4% rule, you could spend $50,000 a year and need a $1.25 million portfolio. However, the rule often ignores taxes, account types, sequence-of-returns risk, and changing market conditions.
Morningstar has taken this research and created a similar plan, where you make more flexible withdrawal frameworks when warranted. These shift with market yields and inflation expectations, and help reduce the risk of running out of money over long retirements.
In short, the 4% rule is a starting point, not a long-term goal.
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Where Your Money Lies Matters
Figuring out where your money goes, whether investing, spending, or through taxes, is extremely important. Experts claim that if your savings are in tax-deferred accounts such as 401(k)s or traditional IRAs, you should gross up your withdrawal needs by your expected tax rate.
It is also useful to check your percentages by logging into the Social Security Administration and using their tools to get personalized benefit estimates and test out different claiming ages. It will show prospective retirees whether they should claim early versus delaying benefits and seeing how that changes payouts.
Health and Long-Term Care
Health and long-term care are often forgotten, but can be one of the largest retirement shocks. Data compiled by Genworth in a 2024 cost-of-care survey found a sustained year-over-year increase in the cost of homemaker services, assisted living, and home health aides, all driven by inflation and labor pressures.
Financial plans that disregard including long-term care or health costs are likely to struggle when retirement hits. It’s best to budget for worst-case scenarios to be prepared if they do come as you age.
Also Read: Five Common Social Security Myths and How You Can Avoid Losing Thousands
Being Behind, Taking Control
Even if you’re a little short of your savings goals at 60, there’s no need to worry too much. There are still opportunities to get those savings built up. Check out some possible options below:
- Save more and use catch-up options/contributions
- Delay retirement or delay claiming Social Security
- Revisit expenses and housing
- Reassess asset allocation and withdrawal flexibility
- Get help running the numbers from a professional
Checklist to Help the Retirement Gap
Get a kickstart on fixing your retirement gap by following these simple steps:
- Log in to your Social Security account and run benefit and claiming-age scenarios.
- Maximize employer matches and automatic contributions; increase contributions where possible and use catch-up limits if eligible.
- Recalculate retirement needs under a different withdrawal or market scenario, and consider conservative starting withdrawal rates if market returns or yields are low.
- Model long-term care exposure using current cost data and factor in insurance or savings into your plan.
- Consult an advisor who can help build a customized cash-flow plan.
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The Bottom Line
Turning 60 should be a celebration, not induce panic due to your investment gap. Based on several experts’ advice, there is still a way to prep for your retirement even as you get closer to the magic age.
There are many ways and paths to end up in a successful financial situation at your retirement, and it is often based upon debts, spending patterns, health risks, and the choices you make in the present.
Be candid about your current living situation and what you want for the future to properly prepare for a peaceful future and avoid the retirement gap.